Solar panel sales soaring – but NOT price energy firms pay you for power

Sky-high energy prices have led to a surge in demand for solar panels, but buyers shouldn’t expect to make a fortune selling power back to the National Grid. 

Figures from trade association Solar Energy UK show that there has been a boom in the number of panels used to generate electricity in the home as well as make money from selling any excess back to the grid. 

More than 3,000 solar systems are installed every week, up from 1,000 a week in July 2020. 

There are three attractions with solar power. First, it is environmentally friendly. Second, it can slash your electricity bills and third, you can sell the excess power. 

Generating your own electricity will certainly cut your bills. A typical 4kW solar panel system will generate around 3,500 kilowatt hours (kWh) a year in most parts of the UK – with the exact amount dependent on the number of hours of sunshine. That same amount of energy would cost just over £1,260 when the Government’s new price cap of £2,500 comes in. 

The problem is making money from your panels. If they produce more electricity than you need, the excess can be sold via the grid. 

Energy firms pay for the electricity you feed in through a Smart Export Guarantee (SEG). But you must sign up to an SEG tariff, otherwise the grid gets your excess electricity for free. And the tariffs are poor value. The best price you can get on a standard SEG tariff is 7.5p per kWh (see table). Even that is 73 per cent below what firms are charging for electricity. 

Ben Whittle, a senior consultant at Energy Saving Trust, says: ‘We agree with calls for homes that have solar panels installed to be fairly rewarded for providing lowcarbon electricity to the grid.’ 

Despite the price being charged for electricity soaring over the past 12 months, what firms will pay you for the energy you generate has barely changed. 

Most firms are still paying virtually the same rates as they were two years ago. However, there are ways you can mitigate low SEG tariffs. First look at switching energy firms, because SEG tariffs do vary. 

The best SEG rates are paid to those who buy their energy from the same firm they sell to. For example, Octopus pays its own customers 7.5p, but if you use another firm for your energy supply, you’ll only get 4.1p per kWh. So, it may be worth seeing if you can switch your energy supply to the firm that buys your electricity to boost your SEG rate. 

The rates range from 1.5p per kWh from EDF for non-customers – it offers 5.6p to its own customers – to 7.5p per kWh from Octopus Energy for its own customers. Assuming you export 500kWh a year to the National Grid, the difference between the best and the worst rates adds up to £30.

Alternatively, you could opt for Octopus Energy’s Agile Outgoing export tariff. The rate paid for your electricity changes every 30 minutes depending on what the price is on the wholesale market. This can lead to bumper returns. 

The company told The Mail on Sunday: ‘On average, customers on this tariff have been paid up to 28.37p per kWh over the past three months.’ 

To get the agile rate you will need a smart meter that can send data every 30 minutes. Another option is not selling your excess electricity, but storing it instead. 

Whittle says: ‘With prices rising, greater savings can be made by households with solar panels using the energy they’re generating themselves – and a battery can make a difference.’ 

Batteries aren’t cheap – you can expect to pay between £1,200 and £6,000 depending on the size – but if it means you can use more of the electricity you generate and pay for less from your supplier, it could be a worthwhile investment. 

Whittle adds: ‘In all cases, having a battery leads to more savings than just having panels, but whether the amount saved can justify the cost of installation will depend on several factors, including how much surplus electricity your panels generate.’ 

On Friday, So Energy said it would be increasing its SEG tariff ‘in due course’. EDF said it continually reviewed its prices ‘to ensure they remain competitive’.